Draft legislation was published by the government on 9 December 2010 to counter what HMRC describes as "VAT avoidance" relating to the supply of services.
In the proposals, which will be published as part of the Finance Bill on 31 March, it states that certain elements of the supply of printed matter for advertising, such as direct mail, should be withdrawn from zero rating.
The move follows a number of HMRC rulings against ad agencies, DM organisations and their print suppliers, stating that the zero-rated products supplied to partially exempt taxpayers, such as charities, should have been wholly or partly-rated as a supply of advertising rather than a supply of zero-rated printed matter.
According to the BPIF, several VAT inspectors have already split out the print from the advertising element, so only the actual printing qualified for zero-rated VAT.
The BPIF, alongside the Institute of Practitioners in Advertising and the Direct Marketing Association, has called for printed mail inserts and direct mail to be wholly eligible for VAT zero-rating.
BPIF director of corporate affairs Andy Brown said: "We could find ourselves in a situation where aspects of the printed process, such as data management, design or fulfilment, are no longer zero rated.
"This is a problem for two reasons. Firstly it has so far only affected ad agencies, but they may seek to pass their additional costs on through the printed product. The second issue of course, is that printers are moving upstream, so many of these aspects are now done by the printer not an agency."
Brown added that some of the inspections already carried out had also incurred VAT back-assessment on products for up to four years.
He added: "Ultimately what we want is consistency on the ground, a set of guidelines for the inspectors to follow so there is an equal playing field across the board.
"We need to ensure that all companies supplying printed marketing materials are treated consistently and fairly and benefit from the full VAT exemptions to which they are legally entitled.
"In particular, we need to stem the threat of any unfair and financially crippling back assessments."
